January is National Financial Wellness month, just in time for those financial fitness New Year's resolutions. But, without a plan for success, good intentions can drop just as fast as the ball in Times Square.
Here are a few simple steps you can take to realize your financial resolutions:
1. Envision what financial well-being looks like to you.
The Consumer Finance and Protection Bureau defines financial well-being as "a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life." This is based upon your current situation, future plans, and your personal values, and it looks different for everyone.
For some, financial well-being means is paying their utility bill every month without crossing their fingers that the check will clear. For others, financial well-being is getting out of debt. When I was growing up, I remember my mother saying that, to her, financial well-being was being able to pay our bills and still comfortably order a pizza every once in a while. What do you envision when you think about being financially fit?
Action Step: Vision boards can help inspire you to reach for success. Create a financial vision board on Pinterest to help keep you motivated.
Learn More About Financial Well-Being
2. Follow your money trail.
Mindful money management behaviors are an important key to financial success. This means understanding the impact of even small daily financial decisions, with each purchase (or non-purchase) you decide that, based on your situation and values, you are willing to accept the good or bad consequences that follow.
Mindful money management rejects the old, judgmental ideals of “good” or “bad” financial decisions, which are unrealistic. Even some financial planners have expensive coffee addictions or take a vacation with money that could have been invested.
Rather, mindful money management allows you to weigh the tradeoffs and payoffs of your decisions and decide for yourself if the benefits outweigh the costs.
Action Step: Review your spending records, such as online bank statements, to see where your money has gone (or keep a spending log if you do not have existing records). Mark any routines or habits that emerge, and ask yourself four questions:
- What is the impact of this habit?
- Is this habit in line with my values?
- Am I willing to accept the consequences for this habit?
- Do I want to change this habit?
3) Make reasonable SMART goals.
Now that you have an idea of where you want to go and what your current situation is, it’s time to make your 2016 SMART goals. SMART goals are: Specific, Measurable, Attainable, Relevant, and Time-bound.
Many New Year's resolutions fail because it's tempting to make unrealistic goals. Anyone who has ever been on a diet knows that if you expect too much to happen too quickly, it is harder to stick to the plan. If you make goals that are reasonable and allow for flexibility, you have a better chance at success. You want your goals to be a just-right challenge—hard enough to push you out of your comfort zone, but easy enough that you have a high chance for success. Start small, and celebrate each achievement.
Action Step:Use the SMART goals guide featured in HSFPP Lesson 1-2 to think through your goals for and create small steps within each goal that you can achieve and celebrate along the way. Review your SMART goals every few months, and make adjustments as needed.
Go to HSFPP Lesson 1-2